Evaluating your next technology investments

By Reed Overfelt

Investment in information technology is critical to firm growth because it enables organizations to "scale" — an ability to manage increases in the complexity of their business processes, organization and business model. However, it has long been debated among academics and practitioners how (or if) IT impacts corporate performance.

So how does one determine where to invest IT budget first, and how much?

Clearly, history has shown that it is easy to spend a considerable amount of money on technology with very little measurable impact to the business. For good reason, my organization has a vested interest in its customers seeing returns on their IT investment. We recently commissioned a study to examine what IT actually does for a business, developing an approach that measures the business capabilities IT can enable. The research utilized a multitude of "business scenarios" to accurately measure how IT impacts all major areas of a firm in terms of performance: sales and marketing, finance, operations, employee productivity and IT infrastructure.

Interestingly enough, the study revealed a high correlation between IT capability and profitable business growth. Organizations that build high-capability IT systems grow 30 percent faster than those that do not, and do so while increasing both revenue and profits.

For the purposes of this conversation, it is important to define the term "IT capability" as being representative of how the best performing organizations couple the design of their IT system with the design of the firm to enable business process scalability — i.e., the design and implementation of critical business processes is tightly integrated with the design and implementation of IT capabilities needed to manage these processes.

So where do you spend those IT dollars? A good first step would be to determine how and if your employees are using your current IT investments. For example, analysts have told us that that only 17 percent of people in mid-size companies are accessing their ERP systems, confined primarily to the back office. Once you've determined what systems they are using and to what degree, you'll have a better understanding of how well your current investments are supporting the different roles people play in your organization.

Now, ask yourself if the technology works the way your business works, or if your business processes have been developed to conform to how the system functions. As we've discussed previously, the technology should support the process, not the other way around.

Once you've identified your firm's underperforming IT investments, you'll be much better positioned to focus your efforts on identifying an integrated solution (meaning quicker to implement and quicker to realize value) to complement or replace your current technology. These solutions may manifest in your sales and marketing by enabling an automated and mobile sales force; in your finance department as automated payroll; in your operations as real-time inventory capabilities; or in your infrastructure in the form of a network that securely ties all your computers and devices together.

The idea that technology should work the way business works, not the other way around, has been the catalyst for a major shift in software design. This role-based approach is spreading throughout our company. Developers and product planners are now writing code to enable scenarios for specific people, instead of just writing features and functions.

One of the first outcomes of these efforts can be seen in our recently introduced small business accounting software package, which provides the capabilities to integrate and manage all of their sales, marketing and financial processes within the familiar Office software environments. The integrated solutions allows users to memorize frequently entered transactions, which can be saved as templates for reuse; manage payroll manually using an integrated Excel spreadsheet solution; back up the company's database to share with an accountant or other consultant; and create profit-and-loss statements by class or business segment.

In short, these designs can be flexible and familiar enough to support the multiple roles and processes that a small business employee will be responsible for, but may also enable those processes to be efficiently scaled as the company grows.

Hopefully, if you keep these concepts in mind when evaluating your next IT investment, whether it be in the form of hardware or software, you'll be better positioned to make the investment that helps you realize the value of your organization's greatest asset — its employees.

Reed Overfelt is general manager of Microsoft's Small and Mid-Market Solutions and Partners group for the Mid-Atlantic area.

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